Whether you’re selling a car to another individual or to a dealership, documentation of the transaction is required. These documents are also legally binding in many ways, encompassing fraud and implied warranties.
Oftentimes a buyer is reassured by a volume of paperwork that traces maintenance and ownership, but the only document that most states insist upon is the title. Signing the title over to the buyer is usually sufficient, but the seller should always check with state regulations to understand his responsibilities in the transaction. Some states such as Texas require both buyer and seller to participate in an application for the title that must include signatures and copies of both individuals’ drivers licenses. There are also additional steps to consider if the owner does not have the title in hand.
Optional paperwork may include a Bill of Sale, Vehicle History Report, and maintenance records.
Vehicle Titles
A vehicle title is an official document that is generated by the state Department of Motor Vehicles. Parts of a title include:
- Name and address of the owner
- Vehicle identification number (VIN) which is stamped on several parts of the original automobile upon manufacture and describes the year make, model, and other attributes; the VIN is used to trace the history of major incidents and locations of registration of the specific auto.
- Odometer reading
How To Check Status Of Car Title
The seller of a used vehicle should be sure the title is in hand and transferable before attempting to execute the sale. Both the seller and buyer of a used vehicle should check the information on the title in the following ways:
- Ensure the odometer reading on the title is not higher than the current odometer reading provided on the vehicle dashboard (falsifying odometer data can be a criminal act);
- Check the VIN number to make sure it matches the sequence of numbers stamped on vehicle parts;
- Make sure the seller signs the title;
- If the title says “salvage” the buyer should be aware of likely restrictions on the ability to register the vehicle in the future as many states will not allow a salvaged vehicle to be registered; sellers who misrepresent the title may be liable under state “lemon laws”;
- If there are two owner’s names on a vehicle title, both must sign the title to the new buyer in order for a sale to be legitimate. If the owner’s names have “or” between them, only one must sign the title to the new owner.
Can You Sell a Car Without a Title?
If the owner does not have the title to the vehicle, he may apply for a duplicate title from the state DMV. Some states, like Texas, will penalize the owner of a vehicle who does not title it within 30 days of purchase (by charging extra fees).
If the owner owes money on a car loan, he does not actually own the car, the bank that loaned the money does, and the title will be held by the bank until the loan is paid. If buying a vehicle that is owned by a bank, it’s best to enter an escrow arrangement whereby the buyer deposits cash for the purchase of the vehicle (the amount that is owed on the loan) into an escrow account with the bank that holds the title, then the title is transferred to that person by the bank. Taking over payments or subleasing vehicles is often illegal or at least frowned upon due to the liability involved.
Vehicle History Reports
One who purchases a used vehicle should always do a VIN check before buying to be familiar with the vehicle history information it reveals. Salvage titles often mean the vehicle cannot be registered for use on roads in many states.
Vehicles that have been totaled, have salvage titles, or have otherwise problematic histories (multiple wrecks, multiple recalls) should be approached with caution by both seller and buyer. Six states including Minnesota, New Mexico, Massachusetts, New Jersey, Connecticut, and New York have “Lemon Laws” aimed at protecting buyers from unscrupulous sellers who try to unload troubled vehicles onto unsuspecting buyers, but the standard of proof to trigger protection under the law is high. Another seven states have laws that set minimum quality standards for used car sales but these may only apply to autos purchased from businesses instead of individuals. These states include Maine, Arizona, Connecticut, Nevada, New Mexico, Illinois, and Pennsylvania.
Vehicle Bill of Sale
This document memorializes a vehicle sale transaction but is not necessary in most cases. A bill of sale simply states the names and addresses of the buyer and seller, the date, sale price, and description of the vehicle. In a few states, a Bill of Sale may be used in place of a title in order to register a vehicle. This is the case in Georgia but only for vehicles over 25 years old. West Virginia requires a bill of sale if the vehicle sales price is 50 percent or less than the book value of the auto. Indiana requires a bill of sale to accompany changes in the title (sales).
Miscellaneous Paperwork Needed to Sell a Car
Check with your state to ensure that you have the proper paperwork whether buying or selling a used vehicle. Some states may require a unique document if the sale price is zero (the vehicle is given away), as is the case in West Virginia.
A Vehicle Transfer Notification is strongly recommended in states like Texas, where a person who sells a vehicle to a dealership may sign over the title but the vehicle is technically in limbo until a buyer is identified. In order to avoid responsibility for activities associated with the vehicle while it’s in the dealer’s possession (such as speeding tickets, toll violations, or accidents), this document should be filed with the state DMV.
